Depletion expense

Depletion expense
See also

Depletion expense - the term describing a periodic assignment to the expense of recorded amounts or the allowable deduction from income tax that is related to the exhaustion of mineral reserves. Depletion is included as one of the components of amortization [1].

Depletion is also the annual expense for the use of natural resources (e.g. timber, minerals, oil) [2].

Depletion base

The depletion base includes the following elements [3]:

  • Development costs - intangible development costs like wells, shafts, tunnels
  • Acquisition costs - cost to obtain property rights through lease or purchase
  • Restoration costs - the costs of restoring the property to its natural state at the end of the extraction of natural resources.
  • Exploration costs - these costs are expensed as incurred

The amount of periodic depletion is computed by multiplying the number of minerals extracted during the period by a depletion rate. Depletion rate is computed by dividing the cost of the mineral deposit by its estimated total units of resource. The entry to record depletion debits a depletion expense account and credits an accumulated depletion account [4].

Coefficient of depletion

The unit depletion rate is systematically revised due to the uncertainties surrounding the recovery of natural resources. Revisions are made prospectively; the remaining undepleted cost is allocated over the remaining expected recoverable units [5].


  1. DIANE Publishing Company 1995, p. 180
  2. Loughran M. 2011
  3. Flood J.M. 2014, p. 413
  4. Duchac J.E., Reeve J.M., Warren C.S. 2016, p. 455
  5. Flood J.M. 2014, p. 413


Author: Klaudia Szydłowska